I had a great conversation this weekend with a long time friend and serial entrepreneur. She's well beyond the "figuring it out" phase. The figuring out phase is one in which new companies figure out what their product is, what their market is and most importantly how to get the market to pay for the product. She's in first expansion phase. She owns and operates a niche face-to-face social and dating service called Nerds at Heart (http://nerdsatheart.com/). She worked hard over the years to perfect the formula of bringing "he-nerds" and "she-nerds" together face-to-face in fun group events which eventually leads to friendships and dating.
It's a great concept that has taken years to figure out the right formula. Well now Nerds at Heart is growing. It started in Chicago, built a strong base, and has expanded into Milwaukee, the Twin Cities and Indianapolis. It has its San Francisco launch set for August 4th. This is all cash flow funded growth (no VC or outside investors) so she's established her cash flow pace, about 1 new city a quarter and most importantly she shared one of her keys to success - STANDARDIZING FOR ALL MARKETS.
How important is standardizing for Nerds at Heart? It's one of the keys to creating an efficient business. So instead of trying to create unique and different programs for each market they are creating broadly appealing programs that are offered in unison in each market. This streamlines all the communication and planning and reduces management overhead and overload.
For entrepreneaurs standardization is a hard process. Standardization doesn't mean the death of creativity. By all means you must innovate if you're going prosper in this cash tight hyper-competitive economy but there is a universal truth in business. Standardization increases business cost efficiency. For most new and existing small business owners I speak with cost control is an absolute necessity for staying in business. Customization for individual customers or different markets regardless of what you offer increases business complexity and therefore business cost. It doesn't matter if you offer software, web services, tangible goods or professional services. The more you customize and "one-off" the higher your on-going business expenses will be.
For most companies you can only consistently offer customization and constant per client innovation if you can pass the cost off to that client. If you have limited pricing power you will be handing your company cash loss "through a thousand small cuts". Now sometimes you have no choice but what you need is a powerful filter.
Every time you want to customize and innovate you need to filter ideas with the following questions:
- How much can I apply these new products/services to my existing customer base?
- Is the client willing to pay AT LEAST my direct cost for customization?
- Does the customization open the door for new clients/customers? (answer truthfully)
- Is this only a one time cost or is there ongoing costs I need to be aware of?
- Is the customer I'm going to customize for willing to make a long term commitment for my products and services?
If you don't have positive answers for at least two of the questions above I wouldn't even consider the effort. Customization can be a major expense and distraction to an organization so look for innovation that can be applied broadly and hopefully universally and keep your costs in control. You will be creating a great foundation for future growth.